Farm subsidy goes up, energy still gets bigger slice
Proposed budget raises support for agriculture and food security to address inflation and supply concerns
The government has proposed allocating Tk89,162 crore for subsidies and incentives in the 2025-26 fiscal budget, with the largest portion earmarked for energy amid concerns over supply insecurity and increasing import dependence.
The total allocation is about Tk20,000 crore lower than the revised budget for the current fiscal year, but slightly higher than the original FY25 figure of Tk88,283 crore.
While energy remains the primary focus, the proposed budget also includes an increased Tk10,000 crore support for agriculture and food security, with subsidies planned for fertiliser, mechanisation, and food assistance.
According to the proposal, Tk37,000 crore will go to the electricity and fuel sector – more than any other sector.
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In his budget speech, Finance Adviser Salehuddin Ahmed said the government aims to reduce electricity production costs by 10% to curb subsidy requirements. Nonetheless, maintaining power and gas supply remains a key fiscal priority.
Earlier this year, the interim government revised the FY25 budget, increasing the allocation for electricity and gas subsidies to Tk62,000 crore from the originally planned Tk40,000 crore.
Much of the increase was used to clear outstanding payments for electricity and LNG imports, partly by reallocating funds from the Annual Development Programme.
The Ministry of Finance, in its Mid-Term Macroeconomic Policy Statement, said, "The government is navigating a delicate balance between sustaining essential subsidies and aligning with fiscal prudence."
The document noted that energy will continue to receive substantial support due to its importance in maintaining supply stability.
Talking to TBS regarding the move, Energy Adviser Muhammad Fouzul Kabir Khan said the finance ministry's proposal to waive the 15% import-stage VAT on LNG would help reduce the government's subsidy burden.
"The money we would save from the VAT cut will help to import more LNG to meet the growing demand for gas in industry and the power sector," he said.
However, he added, "If international LNG prices stay favourable, we could gradually phase out subsidies. Otherwise, the VAT cut alone will not be enough."
Meanwhile, food assistance subsidies are proposed to rise to Tk10,000 crore, up from Tk8,059 crore in the revised FY25 budget.
The agriculture sector is set to receive Tk17,000 crore in subsidies, focusing on fertiliser and mechanisation.
An allocation of Tk8,000 crore is proposed for the cash loan sector, compared to Tk10,000 crore in the revised budget.
The 2.5% incentives for remittances and exports will also continue, with rates to be finalised by Bangladesh Bank after the budget is passed.
On agriculture, Finance Adviser Salehuddin Ahmed said, "The government will not hesitate to spend as much money as needed for fertiliser import subsidies to increase agricultural production."
He also stated that gas and electricity prices would remain unchanged, and that necessary subsidies would be provided while aiming to reduce system loss and production costs.
